This highly simplified code fits on a postcard. It has just two rates: 10% on income up to $100,000 for joint filers and $50,000 for single filers, and 25% on taxable income above these amounts. It also includes a generous standard deduction and personal exemption (totaling $39,000 for a family of four), and no tax loopholes, deductions, credits or exclusions (except the health-care tax credit).While I wholeheartedly support tax code simplification, this proposal seems to have two shortcomings.
First, a continuation of the tax credit for health insurance. I think many people would agree that the preferential tax treatment of health insurance premiums is a factor in their high rates of inflation. Continuing this practice is not a step in the right direction for tax simplification or health insurance reform.
Second, elimination of the Child Tax Credit and the Additional Child Tax Credit, which is a refundable credit. I know, spoken like somebody with six kids and one income. Dad29 recently highlighted the idea that we ought to be expanding the child tax credit.
The argument centers around the fact that we have a social insurance system (i.e. Social Security and Medicare) where current benefits are paid by current workers. Ryan's ideas for these programs may include some reforms that reduce this arrangement, but they do not eliminate it entirely. This means that future benefits require future workers, and producing future workers takes children, hence the enhanced credit.